Partner of Circle Banking Ordered to Correct ‘Unsafe’ Procedures
Cross River Bank was instructed to enhance internal controls and eliminate risky procedures.
Federal Deposit Insurance Corporation demanded that Cross River Bank, one of the most prominent pro-cryptocurrency banks, take corrective action to eliminate unsafe banking practices and improve its supervision of internal controls and credit underwriting practices.
However, Cross River neither accepted nor denied violations cited in an examination report from 2021. The bank neither acknowledges nor denies that it engaged in risky or irresponsible banking practices related to its compliance with applicable fair lending laws and regulations, as stated in the order.
The order requires the bank to eliminate or rectify unsound banking practices identified in the 2021 report, as well as resolve deficiencies and weaknesses identified in future examination reports of consumer compliance.
It must also engage an independent third party within sixty days of the order to conduct a Fair Lending Resources study and submit a written summary to the Regional Director for review, taking into account the bank’s size, development plans, number of credit products, third parties, and merchants.
Cross River Bank offers a variety of banking services to individuals, enterprises, and financial institutions. Additionally, it is well known for providing banking services, payment processing, digital wallets, and lending services to a variety of crypto-related businesses and platforms.
The order was executed prior to stablecoin issuer Circle’s announcement that it was switching from the bankrupt Silicon Valley Bank to the Cross River Bank.
“Trust, safety, and 1:1 redeemability of all USDC in circulation are of the utmost significance to Circle,” CEO Jeremy Allaire said in a statement.
Prior to the publication of the FDIC’s consent order, Cross River Bank released a first-quarter update that demonstrated a 32% year-over-year increase in “fintech lending.”
It also cautioned that due to the increasing regulatory scrutiny on banks, particularly those that support fintech, Cross River is subject to ongoing regulatory scrutiny. The bank stated, “We view our compliance capabilities as a strategic advantage.”